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Hungary's central bank reduces base rate to 2.7% from 2.85%
By Angela McDaniels
Tacoma, Wash., Feb. 18 - The Monetary council of Hungary's Magyar Nemzeti Bank voted to reduce the central bank base rate by 15 basis points to 2.7% from 2.85%, according to a news release.
The council made the decision at its meeting on Tuesday, and the change becomes effective Wednesday.
According to the council, inflation continued to fall in January, mainly as a result of the moderation in fuel prices, and incoming data showed that economic growth continued in the fourth quarter of 2013.
The council believes that Hungarian economic growth will likely continue this year and next and that inflationary pressures in the economy will likely remain subdued over the medium term.
The council characterized global investor sentiment as "volatile" recently, citing the Federal Reserve's decision to reduce further the pace of its asset purchases and the deterioration in perceptions of the risks associated with emerging economies. However, it believes Hungary's position is fundamentally strong compared to other emerging market economies.
The council said Hungary's persistently high external financing capacity and the resulting decline in external debt are reducing its vulnerability, and the current account has moved into surplus, thereby reducing the country's external debt and the economy's reliance on external financing.
In the council's judgment, there remains scope for reducing interest rates in the context of increased uncertainty in financial markets. The council said it will decide on the need and possibility for continuing the easing cycle in view of the baseline projection and alternative scenarios of the March forecast.
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